Variance risk in commodity markets
Marcel Prokopczuk (),
Lazaros Symeonidis and
Chardin Wese Simen
Journal of Banking & Finance, 2017, vol. 81, issue C, 136-149
We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document comovements between the realized payoffs of commodity, equity and bond variance swaps. Similar results hold for expected variance swap payoffs. Furthermore, we show that both realized and expected commodity variance swap payoffs are distinct from the realized and expected commodity futures returns, indicating that variance risk is unspanned by commodity futures.
Keywords: Commodities; Variance risk premia; Variance swaps (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:81:y:2017:i:c:p:136-149
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